FX Math: Ruble Holds Key for QE

The answer for how investors are greeting the new wave of central-bank easing will be found in the Russian ruble, Vincent Cignarella and Stephen Bernard, of DJ FX Trader, write in their latest FX Math column:

The Russian currency is currently sitting at a key technical crossroads. If it were to surge above that level, it would be a big thumbs up from investors about the recent wave of central bank easing from the European Union, the U.S. and now Japan.

The dollar is currently trading at RUR30.99, just below its 200-day moving average of RUR31.09. The dollar has hovered near that key technical level for much of the past week following the Federal Reserve’s decision to buy mortgage-backed securities.

If the dollar breaks decidedly above the 200-day moving average, it is likely to trade higher and test where it crossed the 100-day moving average last week, just before the Fed’s announcement, at RUR31.46. The dollar rising back to that point means investors are showing reluctance to buy into Fed Chairman Ben Bernanke’s plan.

This technical crossroads has the ruble emerging as a great proxy in the currency market for the so-called risk-on/risk-off trade.